Morning. With me, you see my colleague, Tobias Stadler, who will then later support me in the Q&A session. Regarding the Q&As, one organizational information at the very beginning, of course, if you want to ask questions during the presentation, please raise your hand and we will then find the right timing to give you an answer. I just want to quickly go through the presentation of last week, especially for those who did not participate in the last week's call. It's just about 10 minutes or so, or 10-12 minutes. You all know we had our 50-year anniversary, or we have the 50-year anniversary this year, and this means especially 50 years of focus on helping our customers, helping the people working in commercial kitchens.
You can imagine, we can work hard, but we also celebrate, quite intensively. Worldwide, we had this anniversary parties, and here you can see some examples from China, Brazil and Poland. For us, these celebrations are important, and the staff really greatly enjoys that. This is also one way of, of course, appreciating the hard work they do for our customers. Of course, there were also numerous events at our main location here in Germany. The most important I want to highlight, this was our open house day in July. After more than 10 years, I think it was 12 years, we opened our production facilities again in Landsberg for the interested people around Landsberg, and there were almost 7,000 people that visited us.
We are very happy after these great challenges we had in the recent years, to be able to do this again after that long time. One important thing is 2023 is a year in which we, yeah, we are able to, to make a really significant steps back towards normality. This means COVID measures are gone, supply shortages as well, and therefore our order backlog is now coming down close to a newer, normal level. What is even more important to us, delivery times are as short as they, they used to be before, so that we are able to deliver every unit as expected by our customers.
Without having these external factors, we also were then accomplishing internal projects, for example, the new office building in Landsberg, which we are now sitting in for a few weeks now. Also we were able to introduce new accessories and these things of stuff. Like always, we showed one example of a happy customer. Here you see a slide, Spectrum Retirement. They are operating 41 retirement communities in the United States with around 8,000 residents. You can see here a link to a video. If you want to watch that, go on the homepage on the earnings call presentation, and then you find the link.
This customer is also very important to us in terms of the ESG performance, because healthy nutrition, and especially for elderly people, is a more and more important topic. Keeping the vitamins and the nutrition and the nutrition value in the food and avoiding harmful substances, this is perfectly done via steaming food, and in a combination with hot air in a combi oven, then you have a very tasty food. This is a perfect culinary experience for, for these people and supporting their health. Now we want to go to the facts and figures. One thing we always try to highlight is that for us, it's not the highest goal to increase sales, to, to have high earnings, but it's indeed the customer benefit, like showed with the example before.
We think that good results are then the outcome of doing the right things in the right way, so delivering the best customer benefit. Let's start with the business performance of Q1 and Q2. Reducing the high order backlog, we come later to that, sales were boosted in Q1 and in Q2. When you look here, with around EUR 270 million in sales, we were able to increase the sales compared to last year by around 20%, and compared to Q1, we were on a comparable level.
This is something we are discussing now from the beginning of the year, something we are really expecting, so that we have more or less flat development over the quarters in this year, and also what the external expectations from our analysts is. What does this mean in the end? We do not expect a normal seasonality pattern as we know it from before the COVID crisis, with a stronger H2 compared to H1. We expect the seasonality in the orders, and then they will go up step by step.
All over this means that the working off pattern of the order book will, yeah, be a little bit lower over the next quarters, and sooner or later, maybe in Q4, we will see that sales and orders are on the same level again. When we look here on the different regions, how did we do there? Europe, excluding Germany, was good. We increased sales by around 30, 14%, and in Germany, we grew by around 4%. Germany is here a little bit an exception, because last year we had, yeah, let's say, preferred the German market a little bit in the difficult supply situation. We did prefer delivery to Germany because this was closer.
Here, the previous year figure is maybe a little bit higher than it should have been. Our most important growth region stays North America. Here we grew by around 50%, and this was especially led again, by the strong street business, so with the smaller customers in the United States. Latin America was again strong, recovering from the very bad situation, the COVID crisis. In Asia, we are also growing by 29%. Especially Japan was doing very well, and in China, we see a starting recovery of the business. When we look at the product groups, the situation is basically unchanged to what we saw in Q1. In the iCombi product group, we grew by around 27%, and this mainly means a lot of catching up and working down the high order backlog.
In contrary, the iVario declined by around 8% compared to H1 last year. Here, the major reason is that we had very tremendous growth rates last year. Because last year we had a bit better situation with the iVario, because the supply situation improved earlier, and from that point of view, the comparison is stronger. This means for us that this is basically a, yeah, let's say, rather a normalization and not a critical situation in the demand for the iVario. Here, the non-unit business versus the unit sales. The non-unit business, you know, this is including cleaners, accessories, spare parts, and after-sales services.
This is less connected to working down the order book because, of course, we are-- here we have shorter delivery times, therefore we have here less catch-up effect in these figures, as we can see here. All over, we see the so-called non-unit business or after-sales business, rather as a recurring character. This means, this is rather connected with the installed numbers of unit in the field than the recent business environment. Now, maybe to the most discussed topic in the last, in the last quarters. The order backlog, order entry, delivery times. The order entry in Q2 was still clearly below the sales level, which again, brought the order backlog down to a level that we would now regard, close to, to the normal level.
The pre-crisis level, post-crisis level means close to, but maybe it's not the level we would see in the end, so we don't know how this will in the end, settle or stabilize, what the level will be. We must not forget, we were at more than EUR 400 million one year ago, so this is tremendous difference. From that point of view, whether it's then EUR 120 million or EUR 150 million in the end, is maybe not that important. Why is it so much higher than the levels we saw pre-crisis with around EUR 70 million or three to four weeks in sales revenues? Here we mainly see two important effects. The one thing is, of course, the price increases.
We had price increases of around 15% or so on average, which of course, leads to higher figures. On the other hand, right now we see earlier orders. The order pattern has changed so that we see now our order backlog of around 6-7 weeks, which could stay at this level or could come back a little bit. As said before, we do not exactly know, because we don't have the experience as well with this situation. What about earnings? What's quite clear is that if you have higher sales, then this is, of course, positive for the earnings, and we see this. The EBIT reached around EUR 136 million in H1.
This is an increase of 46%. The EBIT margin was at 24.3%. This is 4 percentage points higher than in the last H1. Looking back to 2018 or 2019, this means the EBIT margin is nearly back to these levels we saw then in the H1 before Corona. In these, what we would say, normal years, the H1 was sales-wise, lower compared to the H2. This is what I said before, seasonality. It was rather towards H2. This year, we do not expect to have the same seasonality, and as said, we rather expect a stable sales development throughout the year, or even a little bit below H1.
Since we, in combination, are expecting rising OpEx levels for the second half year, we do not expect the EBIT margin to stay on this level for the full year. When we look at the P&L a little bit more in detail, we see the main driver of the earnings development was, of course, the good sales situation, with an increase of 23%, in combination with the better gross margin, with a little bit more than 56%. This was due to a better productivity in our factories, and of course, a good balance between higher material prices on the one hand, and the adjustment of our sales prices for the products on the other hand. The operating costs, in addition, rose under proportionally as well, by around 13%.
With that, this of course, is positive for, for the EBIT margin, and it came out at this higher level. Overall, we are very satisfied with these earning situations. And I would say especially that the gross margin, yeah, is stabilizing on this level again or getting a little bit better is a, is a good sign for us. Regarding the balance sheet, I think we do not have to discuss a lot. You know, it's, it's solid, and we have... Yeah, maybe the biggest impact was the payout of the dividend, and that we invested a little bit more in, in short-term deposits because of the higher interest rates. This was shaping it a little bit, but otherwise, no big topics to discuss.
CapEx or investments, there is still, yeah, we are on a level, let's say, a little bit higher than the last years, presumably, maybe close to the 2018, 2019 levels, with around EUR 35 million-EUR 40 million. We are lagging a little bit behind this year with the CapEx, especially because of some, yeah, delays in Wittenheim. All over, the biggest projects are, yes, of course, Wittenheim, with the expansion. It's CapEx for Road to China that started. Of course, all over the world, we have investments in the sales offices. I think the major point would be, for example, Japan, with the renewal of the subsidiary.
Again, also in Landsberg, we, we want to increase here with the service parts center, and we do some investment in photovoltaic plants in Landsberg and in Wittenheim. During the last years, with the Corona crisis and the lockdowns, and also the situation with the long lead times, we, we kept the majority of the sales peoples in our sales areas at a quite stable level. Just in a few markets, we reduced sales organizations. Now with the growing business, we are continuing again to invest in our sales force out in the sales subsidiaries.
We, we are of these 85 new jobs that we created over the last six months, there is the big majority, more than 50% is in the sales organizations in order to intensify again the activities with our potential customers. This is crucial. Now finally, then, if we come to the sales and earnings forecast for 2023. Overall, we of course, have very positive expectations. Price increases are effective. The stable material availability and together with a strong customer demand, gives us then a positive outlook for 2023. On the other hand, of course, the positive effects coming from the reduction of the order backlog in the first two quarters, they will not continue in the next two quarters at least not in the same magnitude.
Maybe there will be some, some positive impacts, but not comparable to Q1 and Q2. Therefore, as said before, sales in Q3 and Q4 will not follow the usual, the usual seasonal pattern of a strong second half. For the full year, we expect sales growth, therefore in the high single digit % range. We are now returning to the historical growth trend. At the same time, we will increase certain operating cost elements, as said before, over proportionally, especially in the sales organizations, so in the sales and service costs. In addition, we expect higher costs due to high inflation, and we will continue, of course, with our strategic projects, for example, for the site expansion, in Wittenheim, for Road to China.
All in all, this means we expect operating costs to rise over proportionally in the second half. Coming to then full year expectation, this means we expect the EBIT to increase slightly below the level of revenue growth, and accordingly, then, of course, expect the EBIT margin to be slightly below the high level of 2022. The experience we made, we have some positive developments, as said, with the raw material prices coming down, and we have indeed some, some delays in the expenses for our projects. If this maybe would way higher than the, the negative impact with, it is not, or we would not rule out that the EBIT margin could be on a level with the previous year.
I would say base case is still the guidance we gave in, in the beginning of the year.
Okay. Mm-hmm. Thank you for the presentation, Stefan. I would say we proceed with the Q&A session, so everyone can feel free to raise their hands, and then I will call you up, and then you can just answer, ask your question. If your microphone is not working, then you can also type in your question in the chat, and I will read them out. I can see Nikki already raised his hand. Nikki, please feel free to unmute yourself, and then you can ask your question.
Thanks, guys. Can you hear me?
So we cannot-
Hello, can you hear me?
hear you.
Are you not able to hear me?
Mm. Just a moment. Maybe-
I can hear you.
Yeah.
I'm one of the participants. I can hear you.
Yeah. Now, now we can hear you.
Okay. Sounds like the others can hear me. Let me know, Toby, if you, if you guys can hear me.
Yeah, w-we can hear you, so you can ask your question, Nikki.
Okay. Sounds good. I have a couple questions. The first one is on Germany. During the call, it was noted that the 2% decline in revenue was because of a tough comparison from last year. If I look at the numbers from last year, there was a tough comparison in the Q1 , but not in the Q2 . I just wanted to clarify, you know, because the, the sort of reasoning given for the weak number in Germany was the fact that last year you were prioritizing local orders when you had, you know, a lack of inventory. It doesn't seem to hold up if you look at the numbers year-on-year.
Just a moment. We need to, we need to look up. All over, yeah, but what, what we can say, must you take off. What we can say is, of course, that last year, we in this supply shortage situation, when we had to, let's say, limit the deliveries to the country so that we have contingents, that Germany was preferred because of because of the... Yeah, it's closer. It was easier than to deliver there, then we, we preferred Germany. If we would not have done that, this year, the growth rate would have been higher. Of course, it-- to be honest, I don't have the growth rate for Germany, 22 versus 21, not available. Toby is looking up that.
It's around the same level. If you compare Q2 2021 with Q2 2023, it's around the same level. If you look at the data previous from that, then of course, you can see that we are in Germany on a very high level when we look at the quarterly sales revenues of Q2 in the last 3 years.
I guess, like, if I had to ask the question a different way, is the Q2 absolute German number, is that the right number to think about what sales might be for the back half of the year?
Sorry for the?
Like, is EUR 29 million the right run rate for German sales going forward?
Yes. Approximately, yes.
Okay.
Yeah.
The second question I have for you is, you seem to be doing really well in North America. I think you mentioned, the food truck end market is doing really well. Asia seems to be coming back, particularly China. I think the comment on the call was that Q2 had some growth, but we should see more growth in the back half of the year. I just struggle to see how you only do high single digits for the year, because, you know, doing 23% for the first year, and first half of the year, and, you know, simple math would then basically say that you have to do a -3% revenue growth in the back half of the year.
Can you just explain to me, like, why you've guided so, and then what is, you know, I guess, what is driving this decline in sales year on year in H2 2023?
Yeah. When you look into the quarterly situation we saw earlier, we see that we're filling, let's say, lower order entries with order book. Yeah, with the orders we had in the order book already, and then came to these higher sales levels. We are not working on, let's say, extremely expanding the production capacity in order to work down the order book as fast as possible. We take it as it comes. Step by step, as said, the orders will increase, so we might still have a gap in Q3 between orders and sales. Maybe in Q4, this will diminish completely, but all over, we are still working on the capacity.
We are now at this around EUR 275 million-EUR 280 million. The orders will increase over the next quarters, but not the sales, because this is something that we will, yeah, we can control quite, quite precisely in the end. If that would be the case, that Q4 would be exceptionally good in terms of order intake, and then we want to deliver that, then of course, we could do, but this is something we, we, we don't know yet and we don't see yet. From that point of view, we think the guidance that we gave, the expectations the capital markets have, is in line with the development we see right now.
Is any of this sort of, you know, like, is, is a thought around guidance, you know, revenue that is already in the bag, per se, and then, you know, incremental orders from here could mean that you outperform the guidance?
I would say not, no. This is something indeed that is what we see. As said before, if there would be an outstanding development in Q4, for example, that there would be a big order of a key account that we need to deliver quite quickly, whatever, or in Q3, that doesn't matter when. Yes, why not? This is something. We have key accounts in the pipeline. We know that if there is a key account order that this would help maybe push sales in the short term. To some extent, of course, there is a delivery plan behind the schedule. It's not that everything is delivered immediately. Something like that could, of course, help. Yes.
All over the expectation is, as we said, we have this, it's around EUR 1.1 billion in sales. When we take these figures, of the, or the consensus figures, and so this is something we deem as realistic. Never rule out a big contract with a key account. Of course, if we then would talk about, I don't know, big deals we had in the past were close to 2,000 units, for example, with the IHG Group at that time. This is, of course, helping, but it's not changing the complete story.
Thanks. I'll go back in line.
Thank you.
Thank you. The next one in line is Philippe Vermeil .
Yes. Hello, good afternoon, and thank you for, for taking my question. I have three small questions. First, on Japan. I thought it was quite a, a mature market for you, but you seems to expect growth there. What are the driver? Second, in Asia, you mentioned during the call that Yum! Brands was a, a big account for you. I was wondering if they are equipping new restaurants or if you replace some existing equipment. My last question was on the order intake, that is still quite strong despite tougher economic conditions and lower lead time. Do you think it's a, it's a proof that penetration is increasing due to higher energy prices, but also shortage of labor in your industry? Thank you.
Mm-hmm. Yep. Maybe I'll start with your last question, with the order intake, that is currently strong and why. In general, Stefan said it, in North America, we are very, very successful nowadays, which is also due to the fact that there's a very underpenetrated market we see there, just below or just around 15% of penetration. Now our USPs are really gaining, are really getting very important there. We can save energy, we can save labor, we can guarantee perfect results. All our USPs are more and more known, and the current economic environment also supports these USPs to really, that the decision to invest in intelligent cooking equipment is really sensible for customers. This, to some extent, helps us.
We are near at a basic need of people, so there's always food being eaten outside, then it doesn't matter if it's the Michelin star restaurant or if it's the, the Walmart, for example, so a supermarket chain. We are active in all these customer group, and this definitely supports the overall order in the future, and this is why we think that also in terms of in times of economically, yeah, difficult times, we will still be able to, work closely together with customers and be successful in these environments.
Then on the question with Japan. Japan, basically, to be honest, is a, is a, let's say, a catch-up effect.
We had really, we are quite, quite bad, H2 last year. From that point of view, H2 last year, was down significantly. I think it was approximately on the level of 2020, when I remember correctly, and from that, we, we again grew. I think we are now on a, in terms of H2, on a, let's say, on a record level with Japan as well. Of course, also driven by price increases, like, all over. We, we said in the call that approximately 50% of the growth, the absolute growth, was coming from, from pricing effects. Your question with Yum!? Yes, Yum! is one of the reasons for the quite strong China business.
Yum!, over the last, I would say 20 years, was always among our biggest customers, and of course, you can imagine with such customers, you have some volatility. Sometimes they, they do, let's say, to, to exaggerate a little bit, nothing at all. Then, of course, they start a new project where they say, "We want to equip stores now." We saw that they increased the numbers of units per store, which, which helps us, and we are the major supplier to them, if not the sole supplier. I'm not sure, whether this is, we are 100% or just 90%, but, we are their major supplier, and from that point of view, if they increase, then the number of units per store, this is, of course, helping us.
What kind of food are they preparing with your equipment?
What kind of food?
Yes.
Yes. They are doing mainly sweet dishes and vegetables with our equipment. They, they do not do any fried meat with our equipment. This would not make sense at all for them. The estimate is that it's around 30% of the food in Asia they prepare is coming out of our units, so not more. This is, I would say, less than with many other customers, yeah.
Okay. Thank you.
You're welcome. Next one in line is Peter.
Yes, thanks a lot for taking my questions. Coming back to the U.S. markets, several others have stated that, that there was a replacement cycle going on before the COVID 19 crisis, and then it has stepped up again. Is that also what you see in, in, in your business, or is it mainly that you are taking market share from, from others? That's, that's my first question. My second question is, is around profitability. You are very profitable. Is it more profitable in the U.S. than, than in the European market? That's my second and my third, if I may. How's your business? How are you doing with projects? Is it more single units, or are you involved in, in bigger projects with other...
I can see, I saw an example from the LinkedIn with Gastro North on St. James's Park in Newcastle, that you have been in a very big project there with, with others. How does it work in your line of business?
Maybe the first question, with the overall business in the United States. For us, the United States is a rather emerging market, if you want to put it that way. The United States, they are known for preparing food in a very traditional way, a lot of frying, a lot of barbecues there, and combi steaming is not really known there. I also said it earlier that we are estimating penetration in North America at around 15%. If you compare this with Germany, for example, with 60%-70% penetration, or Scandinavia with around 80% penetration, this is basically all or most of the combi steamers we sell in the United States are new business.
There's not much replacement business, maybe a little bit, but I would say we are close to 80% is really new business we do in the United States. When we go into these new markets, first step is always work with chains or with smaller chains. Stefan mentioned the IHG, so the InterContinental Hotels Group. Now we go step by step deeper into the single restaurants, so in the street business, the so-called street business, where there are family-owned restaurants, so all these little restaurants just around the corner. Now, with being active in the market for quite some times, we are also more recognized in these smaller restaurants and in the street business.
Like I said, with all the USPs we bring with our units, we get more recognized and also from mouth to mouth propaganda, we are more known in the United States. This is definitely the question about the business, then the profitability. We sell bigger units in the United States. When you look at the so-called tabletop units, and there are two different ones. The 6-1/1, where you can put six trays vertically, and the 6-2/1, where you can put six trays vertically and two trays in depth. They're always the units where you can put two trays in the depth. We see that in America, customers really tend to go with the bigger units, and with that, there's a higher gross margin coming from that. We have a positive product mix effect.
On the other hand-
When we look into the United States, especially in the states that are between the coasts, we work together with so-called sales reps. This is a third-party sales reps, because for us, it would be too costly and too much work to really go with our own sales force in there. There are these sales reps that are between us and our dealers, so they also want some bonus or some fee for selling the units. All in all, also with the sales level being a little bit lower, United States is currently below group level in terms of profitability, but we will, as we grow in the United States and as the sales process is more automated, we think that we can also, in terms of profitability, grow into our group margin.
Yeah, so that's that.
Okay, I take the third question. Regarding the project business, all over, here, the U.S. is a good example. We see very good street business, so with the smaller customers, and we see indeed projects postponed. One of the major reasons, this was a feedback from our U.S. colleagues, is the higher interest rates. If you have a project at a customer, a bigger one, either they have to finance it or they, they do an ROI calculation. Now with the increasing interest rates, of course, this is becoming mainly, maybe impossible to finance or maybe, yeah, the maybe the second best alternative in terms of an ROI. From that point of view, we see many projects being postponed or put on hold.
This is, maybe I, I want to add to the iVario thing I, I had on the slides. Another reason why the iVario is suffering a little bit more, because iVario is more in project business compared to the iCombi, where we are more in the smaller ticket business. From that point of view, yes, there are, of course, projects that are running. The, the, I think the one you mentioned or the two, yes, still, of course, interesting projects we have running, but maybe suffering a little bit more than the so-called street business, where a single restaurant owner, he does not mind about interest rates because he doesn't get a loan anyhow.
With a bank, this is a big problem for those guys, so you have to pay cash, and that's why in the end, for him, interest rates are not, not an issue at all.
Okay, great. Thanks a lot.
I think we had one question in the chat. As food in the U.S. is fried, barbecue, yeah, BBQ mainly still, does this limit your potential there compared to Europe, Nordics? Do you take this into account in your total addressable kitchens? Let's say, first part is yes. This is, of course, a limit to us, because if people pre-prefer fried food, then if in the end, they do different things on the, on the menu, which would maybe then have the iVario as a good alternative, then you can use the iVario for frying and you can use it for, for other things. Of course, if frying is the number one cooking method, and it is in the U.S., still, frying is the number one cooking method in the U.S. This is changing.
We have no fry policies in schools, so this is an ongoing process. It's slowly but surely. Of course, this is something we can change over time, I think. This is maybe the same thing as we always say when we talk about Asia. There is deeply ingrained cooking methods, like for a Peking duck, but we are able to produce a Peking duck, and if there is the trigger, then we, we are in business. Do we take this into account in our total addressable kitchens? I would say they are part of the addressable kitchens because this is, let's say, those kitchens we are thinking we can convert to combi steamer technology sooner or later.
Maybe we, we already did some, others not, but they are part of the 4.8 million kitchens that we think we can win over to use combi steamer technology. Yes. Okay. Are there more questions? I think, Nikki, your hand is raised. Was this you?
Sorry, I had raised my hand. Not sure whether you can hear me. It's Christoph from HSBC. Sorry. I have some difficulties getting, Teams doesn't work that well in our system, so I have to dial in via my, via my mobile. Sorry for that. Can I ask a few questions? Yeah, two follow-ups and then some on the capacity. Follow-ups would be, when you talk about Yum! and IHG, can you tell us how much of your revenue share is roughly coming from, like, say, these, these key accounts? Not these two, but generally key accounts, bigger projects. How much of the revenue is that?
Another one would be, when you talked about U.S. distribution, which revenue level do you think makes sense to think about setting your own distribution, as you're obviously giving away, the retail margin to third-party-?
... distributors, rather than capturing that yourself. Where's the sweet spot? Because, I mean, a lot of companies were at the same position at some stage. They decided then to externalize distribution, which is typically a function of how much revenue you make in the country. Then some, some capacity utilization questions. First of all, is it fair to assume that your current production capacity, when I translate that into euros, is roughly EUR 200 million a quarter? I stripped out the, the accessories and cleaners and all of that, so the, the pure, production capacity. What is the current capacity utilization in that regard? Last but not least, I think there's some, some, the progression of the expansion in Wittenheim is, is running slower than expected.
Can you tell us what the reasons are and whether that impacts the production in, in any, in any kind of way? Sorry for so many questions.
No worries. Perfect. Maybe starting with the first questions, with the share of key account customers in our overall sales. This is, yeah, around 20-25% of total sales make up the key account customers we have. Within that, we disclose it in our annual report, our biggest key account customer makes around 2% of below- of group wide- or made 2% of group wide sales in 2022. That's the first question on the key accounts.
I take the second question. The U.S. distribution, do we think about internalizing that? I would say right now, this is not, not an issue. Because when you look at our figures, so we think that we need, of course, external partners, especially for the big areas, between the coasts and outside the big cities, where the density of customers is quite low. That's why we have, in addition, this layer of the sales reps that are basically doing our sales guys' jobs, there, and we have just one or two guys taking care about these sales reps. In the bigger cities, it's, let's say, a comparable situation like in other markets. We have our own sales guys on the street.
They do the demand generation, and when it later on comes to a sale, then they go to the dealer. The dealer for us is a very important multiplier and a leverage in the market, because on a global scale, we have around, let's say, 60,000-70,000 customers per year, and we have 4,000 dealers. We have all over an installed base of 800,000. This means maybe 500,000-600,000 customers, and the dealers are basically managing them, and we are just managing the 4,000 dealers or 4,500 partners, including the service partners. This is an important leverage in the market in order to be really close, the one thing, and on the other hand, to save all this administration costs.
If you would manage 600,000 single customers compared to 4,000 dealers, this is of course, a tremendous cost point. On the other hand, as you said, for the lost margin that we have on this, we save, of course, a lot of cost for this. On the other hand, we must never underestimate the power a dealer has. In terms of, in terms of positive power, if you have a multiplier, if you, if they are happy with you, they will sell your products, they will do cross-selling, they sell accessories without doing anything.
When you look, for example, to Germany, we think that maybe 80%, 70%-80% of the sales, they come without doing anything for us, because just the dealer is placing an order, we put it into the SAP system, we produce, and it goes out. From that point of view, we think it, at least at that level, it does not make sense. What we are doing, if a customer, a big customer, we have this from time to time, if they demand direct delivery in the U.S., for example, it's the main... I would say it's just in the U.S. that we have these cases, then we do it. We do it then. In these cases, we even would pay the dealer for this lost business, sort of, yeah, a fee, because you know you need him.
You need loyal dealers for the future in order to be successful in these markets. From that point of view, here to make it short, no.
Yeah, then last, the last question concerning the capacity. Maybe first starting with the new assembly hall in Wittenheim. There are currently some delays in building the assembly hall and the headquarter in Wittenheim, and this is due to some... The floor in the assembly hall, well, or there were some, yeah, different opinions, if it was the right floor and if everything was produced perfectly by the suppliers. There, we also, we always need to wait until we can fully, yeah, build the assembly hall until all things are figured out and there were some tests done and everything.
Now we, we need to wait if everything is done in a perfect way, and then after we know that everything is running perfectly, we can build, or fully build the assembly hall and then continue, with everything else doing.
I, I would say, in short, it's a quality issue of-
Yeah.
of one of the most important things, it's the floor. There is... We need this time to really, yeah, be sure who is-... Let's say, do we need to renew it or not? Is it necessary? Who would pay for that if it's necessary? In terms of, yeah, utilization, it doesn't have That's a good thing right now, that we do not have another step like we had it last year. The capacity is okay, that we have right now, it's sufficient. Okay, there was another one on capacity utilization.
When we talk about Landsberg, the capacity utilization, it's they are around 65% for this year, so we have still some room to grow also in the future. We see that with our existing infrastructure here, we have enough cap assembly capacity, but the only thing that we are lacking right now is the enough space for our service parts distribution. This is also 1 project we are currently doing, that we renew our service parts distribution center, which will be start at end of this year, and then will continue for a few years until we have a new warehouse. A top-notch warehouse, fully automated in the future.
Okay, done. Thank you.
Thank you.
Hey, guys, I, I had a couple questions.
Okay.
I think I was next in line, right, Toby?
Yep. Perfect.
During the call, I think your CEO had said that you expect raw material prices to come down further from where they are now, and that your new sort of freight deal will be reflected in lower costs, a little bit in 3Q, and but more in 4Q.
Yeah.
I guess based on these two comments, should we expect that on a sequential basis, gross margin will improve in Q3 versus Q2, and then further in Q4?
Yes, I would say, a little bit. We are expecting that the gross margin will continue to increase a little bit. What we do not yet know, this is something we cannot predict, in a way, like, the raw material prices is the price increases demanded by suppliers. We see this in sometimes this is coming on a quite short notice. When I talk to our, I think he's, yeah, he's interim head of the purchase department right now. He said he is expecting that this would even out. On the one hand, the lower cost by the raw material, on the other hand, higher costs for the suppliers.
With the FX, and effect all over, that this would more or less even out. All over, I would say, yes, we are expecting a little bit higher, gross margin. I would say maybe you have, you have a follow-up question on that?
I do. Sorry. On, you talked a little bit about hiring, I think it was like 85 sales and service staff, and that you're gonna invest a little bit more in sales expenses. I appreciate that. The part I wanted to ask you about was R&D and G&A. Are the levels seen for those two in 2Q, roughly in line with where you think 3Q and 4Q might be? From an absolute basis.
No, I think, especially the sales expenses will go up. They will go up, so we do more activities, we have higher people, we will hire new people. Here the expectation is, so this is some, some calculations we have from our controlling colleagues, that the sales and service expense line will go up by 10%-15% compared to H1. The major drivers, so we have, on the one hand, a stagnating or sales line, or coming down a little bit, on the one side, and on the other hand, we have higher costs on the OpEx side. I think gross margin, fine, so higher productivity, plus the effects we discussed, a little bit higher gross margin.
On the other hand, the OpEx will increase, yeah, over proportionally. On the other hand, negative FX impacts that are expected, yeah, for Q3 and for Q4, like we saw in Q2, so quite negative, maybe even, even more severe when we look at the comparisons. From that point of view, this is what we indeed, that's why indeed, there is the expectation that the margins will be lower in... The EBIT margin, not the gross margin, will be lower in, in Q3 and Q4.
Sorry, the question was more about G&A and R&D. Not so much on sales. I appreciate the sales-
Okay.
-expense.
Okay. Yeah, R&D, I would say, is quite, quite constant. I would say here that we could take a half year, one sort of a run rate, maybe a little bit higher in half year two, that's, that's normal. The same is true for the, for the administration costs.
Perfect. Thanks.
Hmm. There's another question of you there in the chat. It is freight cost and % of revenue. Do you disclose the figure? When we look at our, yeah, sales related costs, there's freight costs, there's provision or installation, this is slightly below or was in H1, slightly below 5% of sales revenues. Yeah, of these, around 5%, around two-thirds are coming from the freight cost to our subsidiaries and from our subsidiaries to the customers then, yeah. The second question: In terms of innovation, do you plan any major upgrade for your two products in a close, in the close future? Do you already use AI in your intelligent cooking algorithm? First question, this is always easy to be answered. We do not disclose future products.
Once we have the innovation or the newest step in terms of products or product generation, then we will just go to the markets with that because we're, yeah, kind of a two-product company. If we would say that in 2030, there will be a new product, which is the, the complete future for the market, then this would harm our sales revenues in the one or two years before that. We do not disclose that. Do you already use AI in your intelligent cooking algorithm?
Yeah, it's, it's always how you define AI. If the definition of AI is that I, that I have thousands of trials that I do, a person is doing, and then we transfer this experience into, into software, and out of this, I have then intelligent cooking paths, then I would say, say yes, of course. We also have a learning system, so that the machine learns about the habits of the user and adjusts then the presettings to the new, to the new way of cooking, maybe a new user has compared to maybe a predecessor. So from that point of view, this is, I would say, AI. It's like we always say, everybody's talking about automatic driving right now. We do automatic cooking now for around 20 years.
I would say this is sort of, sort of AI. Yes, of course.
For now, there are no more questions. If there are any more questions, please feel free to raise your hand or to write up chat.
Perfect. If you want to maybe give us a feedback on what's good, we want to put this into the process in future. If you have a feedback, what's good on this course, what should we improve, or what, what would you want to see in another way? Please feel free also to send us an email, and then we will see what we can do in future to improve your experience here.
Mm-hmm. I would say maybe we wait, wait another second until. There's still they are writing at the moment, at least chat says that. I would say we wait a few seconds and then see if there are more questions. Mm-hmm. That's it.
Thank you.
Thank you very much.
Okay. Thank you.
Take care.
Take care, then see you soon.
Thank you.
Bye-bye.
Bye.
Cheers. Bye.